Problems and Issues Arising with the Exports of Tanunda Winery - Case Study Example

Tanunda winery Table of Contents Table of Contents 2 Executive Summary 3 Introduction 4 Problem ment 4 Key Issues 4 Data Analysis 6 AlternativesConsidered 7 Recommendations and Rationale 8 Action and Implementation Plan 9 Work Cited 11 Executive Summary This report basically explains the problems and issues arising with the exports of Tanunda Winery. It focuses majorly on the export position of Tanunda Winery during the 1990s. The company was successfully selling wine in Australia. The Marketing Manager has to prepare a feasibility report on whether to take up an export drive or not. I have explained in the report the key issues arising in the case. The alternatives available, recommendations, and action and implementation plan for Tanunda Winery. Introduction The Tanunda Winery, one of the leading mid-sized wineries in Australia, was located in the Barossa Valley of South Australia. A young Australian-trained winemaker, Colin MacIntosh had started it in 1976. The Tanunda Winery started producing a range of red and white wines that were speedily gaining acceptance in the marketplace by 1985. The company had established a solid reputation in Australia as a consistent manufacturer of high-quality premium table wines. The company was known for its marketing skills. The company had been successful in generating revenues domestically but did not succeed in the international markets due to lack of an export strategy. There existed an ample opportunity for the company to enter the international markets. Problem Statement The main area of concern was to find way into the International markets so that Tanunda Winery could sell their quality table wines and increase their volumes. It was difficult to find which markets to precisely target. In the given case, the marketing manager of Tanunda Winery had been given an assignment to evaluate the feasibility of launching a major export drive. Key Issues The Tanunda Winery was successful in Australia but did not achieve success in international markets. The reason being it is an Australian company producing quality table wines and people worldwide hardly know about Australia as a producer of wine. The senior management group decided in a strategic meeting held in early 2000 that a substantial growth opportunity existed in export markets and therefore George Steen, the marketing manager started preparing for a feasibility study for the next strategy meeting. On forecasts of a very positive environment in several export markets by the Australian wine industry report, George found it as an opportunity to enter foreign markets in a big way. The major concern of Bruce Clark, the general manager, was about the ability of entering worldwide markets and making profits because of severe competition from the old-world countries such as Italy, Spain, and France who are experts at producing well-recognized wines with huge volumes and value-pricing. Their main concern was to catch up with which markets to sell large volumes of wine. The recognition could be done via the Olympic Games to be held in Sydney. The marketing efforts led to increase in profits but the rate of increase was declining as well as the average returns which is measured by profits as a percentage of sales. In the previous two years, Tanunda was a passive exporter that is it did not make much effort in drawing wine importers and did not have any export strategy. The domestic sales which also marginally and an unpredictable sales pattern in the bottled table wine market was also an area of concern for Tanunda Winery. Ageing population in Australia led to stability in the wine markets domestically. The stability in the Australian markets was also a concern which pushed them to expand their international markets. Rising mergers and acquisitions in the early 1990s was a growing concern or issue for the mid-sized companies. The small companies joined hands with bigger companies and therefore increase the bigger companies’ portfolio of products. It was becoming difficult for mid-sized companies such as Tanunda Winery to fight for a smaller part of the market. The overall low growth in volume in the domestic markets was also a big issue for Tanunda. U.S. wineries were gaining a considerable share in the overall export market. In the exports segment, Chile was also becoming a core competitor for Australia. They had to decide on the markets where they could export and generate profits (Zou 1). Data Analysis The concern relating to export markets was because United States gained a considerable market share. The export volume of U.S. in 1998 was 272 million litres valued at US$ 537 million which is equivalent to AUS$ 852.4 million. In comparison, Australia’s sales were 1,958 million litres valued at AUS$ 883 million. These figures reflect that inspite of Australia exporting more than 7 times than that of U.S., the monetary value remains almost the same that is hardly a difference of AUS$ 30. To compete with U.S. is really difficult in the international markets as the figures reflect. The Olympics this year was a great event or stage for Tanunda to spread its recognition in the international markets as because people from all round the world would turn up. The innovative advertising campaigns prepared for the Tanunda Winery increased their brand recognition. The marketing efforts led to increase in sales from $33,200,000 to $49,400,000 and profits before tax from $4,800,000 to $5,700,000 between 1995 and 1999. The concern aroused when a decline in the rate of increase in profits as well as average returns was observed (Verma 350). The domestic sales also was an area of concern as because the population of Australia is ageing which is ultimately affecting the domestic consumption of wine and therefore the domestic revenues will get impacted in the future. Tanunda being a passive exporter is not helping it get wine export orders. There is no export strategy on the part of the management so it remains a grey area of concern and as discussed in the case the major issue is the export drive. There are huge numbers of competitors in the international wine markets starting from old-world countries such as Italy, Spain, and France to new-world countries like South Africa, United States, and Chile. Inspite of the world class wines they have to compete in a tough competition market. The rise of mergers and acquisitions in Australia have impacted Tanunda Winery the most as most of the smaller firms merged with the bigger ones and could easily market their products under the new portfolio of wine products. The mid-sized was finding it difficult to survive that mix of portfolio of the bigger firms as discussed in the case. Alternatives Considered The following alternatives can be considered taking into account the case facts: It can export to countries such as the United Kingdom, the United States, Canada, and Japan which will offer a good potential for the company’s products. Tanunda has already been achieving a significant amount of sales in the above countries as per facts of the case. The UK is Australia’s most important and largest wine market. The United States being Australia’s second largest wine market, with exports worth AUS$ 231 million in the past year. Premium wine products would be the key to U.S. markets (Greenblat). Canada is the fourth largest wine market for Australia and is consistently growing by 10% over the previous five years. Japan is a promising market for Australia. Inspite of a recession in the two-year period 1997-99 Australian wine sales have continued to double. Even the prices also seem interesting in United States and Canada as they import Australian wine at the rate of $5.92 per litre and $5.63 per litre. It can continue to promote in the domestic markets and effectively increase their domestic consumer base by effective marketing tools. It can export its premium quality wines to foreign countries and the regular quality wines should be promoted for increase in domestic consumption. Recommendations and Rationale I would recommend going with the third alternative as because the regular quality wines are available at the stores in every country at a cheaper price with better quality than that of import as we are considering the major markets such as United Kingdom, United States, Canada, and Japan. The duties or taxation will play a major role in the regular quality wine products as the prices go up in case of regular quality wines and therefore to compete in the international markets Tanunda will have to reduce its profitability in the segment. It should rather focus on the domestic markets for the regular quality wines so that it can control the fall in the domestic sales. The ageing population is a problem but still it can through various marketing and promotional tools overcome the barriers. Tanunda should concentrate more on exports for the premium quality wines as people do not consider price a factor and therefore if the wine is better in taste then the consumers are even ready to bear the extra cost arising out various duties or taxation. The premium quality wines should be showcased in the stores in the United Kingdom, United States, Canada, and Japan. A plan should be drafted for the promotional and marketing strategies in the above mentioned countries. Action and Implementation Plan The company should first go about with the promotion of the wines in Australia itself so that the consumption in the domestic country itself does not go down. The first action the company should take before starting the exports in full speed is to improve on the relations of the company with that of the exporters and importers. The time has arrived for them to explore the opportunities in the export market. The company should then start with the most promising market that is Japan where U.S. and France are the major competitors for higher-priced premium wines. In Japan wine is consumed most in wine bars and restaurants so the company should seek a target plan of promoting it to restaurants. There are many Australian restaurants and wine bars in Japan so they could put up something of this sort “Australian wine in Australian restaurants”. This would be good way of promoting the wine in Japan. The company should then move to Canada where they do not have a good market share but in the previous five years it has been growing by over 10 percent per year. The Canadian market could be explored as the rate offered is also higher than that of U.K. which is Australia’s largest market. The rate offered in Canada is $5.63 per litre. The company should then capture the U.S. markets by starting from the East Coast of the U.S. Then they should start with New York, Chicago, Boston-Lawrence-Lowell-Brockton, Washington, and Los Angeles. The promotions should be done like “A glass of wine a day is good for health” which will draw weekly drinkers into at least twice or thrice a week. Finally, it should enter the markets of United Kingdom which is their most important and largest wine market. As majority of the wine sales is in the grocery chains it should have a good logistics and supply chain system. Work Cited Greenblat, E. Renowned wine leader to carry out US crusade. 2013. Web. October 21, 2013. . Zou, S., and Kim, D. (2009). Export Marketing Strategy: Tactics and Skills That Work. New York: Business Expert Press. Verma, H. (2006). Brand Management. New Delhi: Excel Books. Moore, C., Bruce, M., and Birtwistle, G. (2012). International Retail Marketing. United Kingdom: Routledge. Hiam, A. (2009). Marketing for Dummies. Canada: John Wiley & Sons. Pride, W., and Ferrell, O. (2011). Marketing. United States: Cengage Learning. Verma, R. (2009). Brand Management. New Delhi: Laxmi Publications, Ltd. Trehan, M., and Trehan, R. (2007). Advertising and Sales Management. New Delhi: FK Publications. Read More